US dollar sold off after cautious Fed comments

Australian Dollar:

The Australian dollar spent Tuesday trying to recover from Monday’s losses however struggled to remain above the US78 cent threshold. As trade continued the lack of domestic economic data continued to leave the market light as investors waited patiently for European and US numbers for guidance. Overnight comments from the US Fed saw the USD sold off across the board and the Aussie dollar rallied back above yesterday’s open to sit this morning stronger at 0.7835. Today focus will return locally as construction work and wage price index will be monitored before further talks from ECB president Draghi and US Fed Chair Yellen.

• We expect a range today of 0.7790 – 0.7870

New Zealand Dollar:

The New Zealand dollar continued to fall on Tuesday underpinned by weak risk sentiment and a poorer than forecast Inflation Expectation release. The Kiwi dropped half a per cent in early trade touching lows of 0.7488 before levelling out in the afternoon in anticipation of overnight European and US data. Inflation expectations came in at 1.8 per cent leaving the door ajar for a potential rate cut later this year and investors will be watching closely for any indicators. Overnight the US dollar was hit hard by comments from the Fed reserve chair Janet Yellen in relation to a delay in an increase in interest rates. The Kiwi managed to retrace the day’s losses to open this morning marginally stronger at 0.7489. Today all eyes will be on the talk from RBNZ Gov Wheeler and the tone he addresses the nation in for clues as to future economic guidance.

• We expect a range today of 0.7445 – 0.7525

Great British Pound:

The British Pound ended up holding steady against the US dollar after a Tuesday filled with local and offshore events. During the Inflation report hearings Bank of England Governor Mark Carney talked about how inflation was much lower than required and mentioned that it was the BoE’s responsibility to lift back to the 2 per cent target. The GBP was stronger after these comments and when the US Federal Reserve announced interest rates would still take another couple months to be lifted the US was sold off seeing Cable rally to open stronger at 1.5461 this morning. The GBP similarly gained against the Kiwi(2.0642) however a strong Australian dollar(1.9727) managed to gain back some of Monday’s losses. Today eyes will once again watch governor Carney speak as well as another talk from the US Federal Reserve Chair and ECB president Draghi.

• We expect a range today of 1.9695 – 1.9775

Majors:

In a night filled with global events the Euro finally saw some reprieve after Greece was given a much needed extension for the struggling nations bailout. The bailout was scheduled to expire on February 28 and investors have been watching closely as to the outcome. A dovish testimony from US Federal reserve chair Janet Yellen soon after saw the US dollar sold off across the board as she announced an interest rate increase was at least a couple meeting away. Poor US consumer confidence did not help as an array of currencies rallied against the Greenback. All eyes will now focus on ECB president Draghi in Brussels and US Federal Reserve Janet Yellen who will be speaking overnight.

Data releases:

• AUD: Construction Work Done q/q, Wage Price Index q/q
• NZD: RBNZ Gov Wheeler Speaks
• JPY: No Data
• GBP: BBA Mortgage Approvals, BOE Gov Carney Speaks
• EUR: ECB President Draghi Speaks
• USD: Fed Chair Yellen Testifies, New Home Sales, Mortgage Delinquencies, Crude Oil Inventories